A pioneering partnership will see 400 affordable green housing units in the Western Cape and Gauteng being developed, thanks to a R120m concessionary loan funding pool to be administered by Nedbank.
Affordable Housing Development Finance at Nedbank Corporate and Investment Banking (NCIB) and the Green Fund, which is managed by the Development Bank of Southern Africa (DBSA), concluded the agreement which will see sustainable, green housing in the affordable housing market become a reality. The agreement also includes monitoring energy and water consumption in green, affordable housing units to verify actual savings.
“Green, affordable housing combines social and environmental sustainability to promote access of lower middle income individuals to better quality housing units with lower running costs,” said Manie Annandale, head of Affordable Housing Development Finance at NCIB. “This captures the spirit of Nedbank’s Fair Share 2030 initiative, recognising that to be a thriving bank, we need to operate in a thriving society.”
Some 400 families across Gauteng and the Western Cape will benefit together with local industries in the green housing space, such as suppliers of insulating materials, efficient lighting, heat pumps and solar water heaters.
“Funding initiatives such as this partnership are meant to support South Africa’s efforts to move towards a greener economy which is a priority focus area for the DBSA’s Green Fund,” said Mohale Rakgate, GM for Project Preparation Development unit at the DBSA. “A partnership with Nedbank’s Affordable Housing Unit makes it possible to fund innovative affordable housing projects which contribute to achieving the objectives of the National Development Plan.”
Environmental sustainability is not a luxury in the affordable housing market as lower lifecycle costs make green homes attractive to this segment. A typical household in this market earns up to R20,000 per month, purchasing a home for under R620,000 or occupying a rental unit costing up to R6,500. “Utility bills amount to 10% to 20% of rental or bond instalment, pushing a household’s accommodation-related expenditure up to 40% to 50% of gross income, and placing pressure on affordability,” said Annandale. “Above-inflation increases in electricity tariffs will erode affordability further in years to come. Meaningful savings in electricity and water bills can reduce the likelihood of default on rentals or bond payments, and help to improve access to housing for new market entrants.”
The green tools are changing
In South Africa, the new benchmark for environmentally sustainable housing is the EDGE (Excellence in Design for Greater Efficiencies) tool which was developed by the International Finance Corporation (IFC) for application in developing economies, and recently adopted locally by the Green Building Council of South Africa (GBCSA) as the basis for a new green housing certification system. Compliance requires savings of at least 20% in each of three categories, namely energy, water and building material embodied energy. It is anticipated that a family of four living in a new two-bedroom unit, compliant with EDGE and SANS 10400-XA, could save as much as R350 to R450 per month compared to an older conventional unit with no energy efficiency features.
Once savings are demonstrated, it is anticipated that property developers will be able to recover the green construction premium from residents by sharing in the operational savings, either through marginally higher selling prices or rentals. In the case of housing sales, mortgage lenders will play a critical enabling role by considering the likelihood of lower operational costs in their assessment of home loan applications relating to units in green developments.
Fair Share 2030 is Nedbank Group’s business response to a series of economic, social and environmental challenges that threaten society’s long-term success. It represents an annual flow of money to be lent in a way that contributes to meeting eight major long-term goals for the future. The goals relate to provision of affordable energy services while containing carbon emissions; sustainable clean water and sanitation; improved employment rates; savings and investments that support national development objectives; and good, cost-effective health and educational outcomes. These goals address socioeconomic and environmental issues, and their interplay.